Batesons Hotels (1958) Ltd, Re

JUDGE HODGE QC: This is my extemporary judgment in the matter of Batesons Hotels (1958) Limited, petition number 2707 of 2012. Mr William Brian Bateson holds 32.8 per cent of the shares in Batesons Hotels (1958) Limited. On 7^th June 2012 he presented a petition to the Manchester District Registry of the Chancery Division under section 994 of the Companies Act 2006 seeking relief on the grounds that the affairs of that company had been conducted in a manner that was unfairly prejudicial to his interests as a member of the company. The first and principal, indeed the effective, respondent to that petition is Mr David Brunton Bateson, the petitioner’s brother, who holds the remaining 67.2 per cent of the shares in the company. The second respondent, which has not taken any active part in the petition, is the company itself.

Points of defence were served on 3^rd August 2012 and points of reply on 21^st September 2012. There was a request for further information of the points of defence pursuant to Part 18 of the Civil Procedure Rules, which was only partly, and (the petitioner would say) unsatisfactorily, answered on 31^st October 2011. The reason why not all of the further information sought was provided was that on 30^th October 2012 the solicitors for the first respondent (to whom I shall refer simply as “the respondent”) had settled an application notice which was apparently issued on 14^th November 2012. The application notice sought the striking out of certain parts of the petition on the grounds that they were said to disclose no reasonable grounds for a claim. Alternatively, the respondent sought summary judgment on those grounds on the footing that they had no real prospect of success, and there was no other compelling reason why those issues should be disposed of at trial. The parts of the petition which were sought to be struck out, or in respect of which summary judgment was sought, were: (a) the unauthorised buyback of shares in 2001 (paragraphs 26 to 30); (b) the unauthorised transfer of assets in 2001 (paragraphs 31 to 32); (c) the unauthorised buyback of shares in 2008 (paragraphs 33 to 35); and (d) the borrowing and lending of £750,000 (paragraphs 36 to 38). Relief was also sought in relation to consequential parts of paragraph 51 and paragraph 1 of the prayer for relief.

That application was supported by a witness statement from Miss Lisa Jane Clough of Turner Parkinson LLP, the solicitors for the respondent, dated 30^th October 2012, together with exhibit LJC1. Evidence in opposition was served by the petitioner in the form of his witness statement dated 18^th January 2013, together with exhibit WBB1. The petitioner’s witness statement extends to some 28 pages and 69 paragraphs; and there is an extensive exhibit comprising some 167 pages.

The matter came on for hearing before District Judge Obodai on 25^th January 2013. By that time, there was also a further, short, witness statement filed on behalf of the respondent from Miss Catherine Anne Bateson, a niece of both the petitioner and the respondent, dated 23^rd January 2013, explaining about the discovery of certain documents comprised within the statutory books of the company. According to the district judge’s notes, the hearing before her started at about 11.25 on the morning of 25^th January and concluded just before twenty to four that afternoon. A full transcript of the proceedings has been produced to the court (at divider 13 of the appeal bundle) and it runs to some 56 pages. I have been taken by Mr Hugo Groves (of counsel), for the petitioner, through the salient parts of that transcript.

At the hearing before the district judge, Mr Groves appeared as counsel for the appellant petitioner (then the respondent to the application) and Mr Neil Berragan (of counsel) appeared for the respondent to the petition and the applicant. The district judge reserved judgment and on 13^th February 2013 she handed down a detailed written judgment extending to 77 paragraphs. For the reasons there given, paragraph 1 of her order struck out paragraphs 26 to 38, paragraphs 51(i) to (v), and paragraphs 1(a), (b) and (d) of the prayer of and to the petition on the grounds that they were said to disclose no reasonable grounds for a claim.

On 6^th March 2013, the petitioner, who had failed to resist the strikeout of the relevant paragraphs of his petition, filed an appellant’s notice. The matter came before His Honour Judge Pelling QC, sitting as a judge of the Chancery Division, on paper on 28^th March 2013. He ordered that the appellant’s application for permission to appeal, with the hearing of the appeal (subject to permission) to follow, should be listed before a Section 9 Chancery Judge at 10.30 today, 12^th June 2013. This is the hearing of that appeal.

There are detailed grounds of appeal and these have been supplemented by a detailed written skeleton argument from Mr Groves (of counsel) for the appellant petitioner, dated 19^th March 2013. His written skeleton argument extends to some 54 paragraphs. Mr Berragan, who appears for the respondent, both to the appeal and the petition, has filed and served a written skeleton argument, dated 5^th June, which extends to some 26 paragraphs. I have had the advantage of pre-reading all of the relevant documents, including the petition, the points of defence and points of reply, the supporting and opposing witness statements, the judgment of District Judge Obodai, and the written skeleton arguments of both counsel, in advance of the hearing of this application and appeal. The matter came on for hearing just after 10.30 this morning. Mr Groves addressed me for the appellant for about two hours and five minutes. Mr Berragan responded for some 35 minutes in total, separated by the luncheon adjournment; and then Mr Groves replied for a little over 30 minutes. I now proceed to deliver my extemporary judgment.

Since this is an appeal from a decision of the district judge, for which permission to appeal is required, I have to bear in mind that an appeal will only be allowed where the decision of the lower court was either wrong, or unjust because of a serious procedural or other irregularity in the proceedings in the lower court. No permission to appeal has been granted as yet, although such permission is required. I have to bear in mind that on an application for permission to appeal, such permission should be given only where the court considers that the appeal would have a real prospect of success, or there is some other compelling reason why the appeal should be heard.

I have to bear in mind that this is an application to strike out paragraphs of an unfair prejudice petition in advance of trial, and without any hearing on the facts. Mr Groves reminds me that a claim should be struck out only where it discloses no reasonable grounds for bringing the claim, such as where the facts, even if true, disclose no legally recognisable claim; that is to say that the claim would fail on the law. He has referred me to the passages at paragraph 3.4.2 of the current (2013) edition of Civil Procedure at page 73. In particular, he reminds me that a statement of case is not suitable for striking out if it raises a serious live issue of fact which can only be properly determined by hearing oral evidence. An application to strike out should not be granted unless the court is certain that the claim is bound to fail. That is the test that the district judge should have applied on the respondent’s application; and that is the test that I have to apply when considering whether her decision was wrong or unjust because of a serious procedural or other irregularity in the proceedings before her. I bear those matters firmly in my mind.

As I have mentioned, the district judge’s judgment was a reserved, handed down judgment. She set out the background to the application at paragraphs 1 through to 3. She summarised the parties’ respective pleaded cases at paragraphs 4 through to 14. She then set out at paragraphs 15 and 16 the nature of the respondent’s application to strike out parts of the petition. At paragraphs 17 and 18, she identified, in my judgment correctly, the issue the court had to decide. She said this:

“The issue before the court is a question of law. That is, can a petitioner complain of unfairly prejudicial conduct which occurred before the petitioner became a shareholder, and to which all the shareholders at the material time expressly consented?”

In the present case, the petitioner’s case is that he can do so, notwithstanding that he only became a member of the company on 10^th November 2011, when the stock transfer form transferring his shares from the trustees of a family trust was presented to the board and registered, because he was a beneficiary under a trust under which the shares were held prior to November 2011.

To expand slightly upon that chronology, the petitioner says that he became beneficially interested in the relevant shares upon the death of his father on 16^th May 1970. He became beneficially entitled to the relevant shares as a result of an appointment which took place on 17^th November 1981. The events of which a complaint of unfairly prejudicial conduct is made occurred in 2001 and in 2008.

The district judge considered the law and the case law at paragraphs 19 through to 51 of her judgment. She identified the starting point as section 994(1) of the 2006 Act. That subsection provides, so far as material, that a member of a company may apply to the court by petition for an order under Part 30 of the Companies Act 2006 on the ground that the company’s affairs are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of members generally, or of some part of its members (including at least himself).

Emphasis should be given to the fact that the subsection refers to the company’s affairs having been conducted in the past, to the requirement that such conduct should have been unfairly prejudicial, and to the fact that such unfairly prejudicial conduct should relate to either the interest of members generally or at least to some part of its members, including at least the petitioner himself.

As I say, the district judge set out the law and case law at paragraphs 19 through to 51. Having analysed the leading House of Lords decision of O’Neill v Phillips [1999] 1 WLR 1092, the district judge concluded, in my judgment correctly, that in order to succeed a petitioner must show either: (1) that there had been a breach of the rules upon which he had agreed to become a member of the company; or (2) that the company was using the rules in a manner which was contrary to good faith. I understood Mr Groves, for the appellant petitioner, to accept that formulation.

The district judge went on to consider the decision of Mr Justice Ferris in the case of Lloyd v Casey [2002] 1 BCLC 454. At paragraph 35, the district judge said that Mr Justice Ferris in that case had accepted that there had been unfair prejudice because the respondent had made substantial payments to a pension fund for his own benefit, which had been contrary to the express agreement under which the parties had entered into business.

Mr Groves accepted that as an accurate summary of the ground of Mr Justice Ferris’s actual decision on the facts of that case; and, in my judgment, he was right to do so. It was held that because those payments had been made contrary to the express agreement under which the parties had entered into business, the conduct had been unfairly prejudicial to the petitioner when he later, and ultimately, became a member of the company. That seems to me to be borne out in particular by what Mr Justice Ferris said at paragraph 102 of his judgment, where he described the relevant conduct as representing a serious departure from the arrangement between Mr Casey and Mr Lloyd on the basis of which the company was formed, and his finding that it amounted to unfairly prejudicial conduct for the purposes of section 459.

The district judge referred to the respective parties’ submissions on Lloyd v Casey, and she indicated that she preferred Mr Berragan’s analysis of that case, and could not agree with Mr Groves’s interpretation of the decision or his submissions in relation to it. She concluded that unless the petitioner could show that, at the time of the transaction, there had been an agreement or understanding between himself and the respondent which imposed equitable duties in the petitioner’s favour, as in Lloyd v Casey, he could not complain that there had been a breach of an equitable duty. She said that she had not been taken to any evidence to show that there was any agreement or understanding between the respondent and the petitioner at any time, or any communication between the petitioner and the respondent concerning the shares held on trust for the petitioner or his rights or expectations, or any communications concerning the company’s affairs in any way, shape, or form prior to 2011.

However, and in any event, she said that the respondent’s application was based on the primary issue before the court, to which she had referred at paragraph 17 of her judgment, and to which I have already made reference. The district judge accepted that, on the authority of Lloyd v Casey, the petitioner was entitled to complain of conduct which had occurred before he had become a member of the company. However, at paragraph 48, she said that whilst he could petition, the petitioner must nevertheless demonstrate that the conduct complained of was unfairly prejudicial to his interests as a member. She posed the question whether he could do that in the present situation, on the facts of the instant case, where the matters of which the petitioner complained as being unfairly prejudicial conduct occurred prior to him becoming a shareholder, but were matters to which all the shareholders at the material time had expressly consented.

She said that the answer was to be found in the Duomatic principle. She described that by reference to the sixth edition of Hollington on Shareholders’ Rights. She set out the relevant passage at paragraph 49 of her judgment. At paragraph 50, she said that there was nothing, of course, that prevented the petitioner, now that he was a member, bringing a complaint, and alleging unfair prejudice, with regard to matters which had occurred prior to his being a member. She went on to say that the difficulty he faced was that, to the extent that he was alleging breaches of duty by the directors, and the other matters which were set out in his petition, these had been ratified by the unanimous vote of the shareholders, and were subject to the Duomatic principle.

At paragraphs 52 through to 77, the district judge proceeded to apply the law to the facts of the case, and the respondent’s application to strike out the relevant parts of the petition. At paragraph 53, she stated that O’Neill was authority for the proposition that there were two ways to establish unfair prejudice, the first being a breach of legal rules – for example, the articles of association, breach of director’s duties to the company, and so forth – and the second being the equitable category, where the petitioner can say that what had been done, although it had been done in accordance with the rules, was in breach of some understanding between the petitioner and the company, or the petitioner and the respondent. In the latter case, that was referred to in O’Neill as, and gave rise to, “the legitimate expectation”. She said that, in order to give rise to that legitimate expectation, one would need an agreement or understanding that the affairs of the company would be conducted in a particular manner.

At paragraph 54, she said that paragraph 22 of the petition would appear, on the face of it, to be an attempt to bring the case within the second limb. The district judge had already made reference to paragraph 22 of the petition at paragraph 43 of her judgment. Paragraph 22 of the petition reads as follows:

“It was a fundamental understanding between the petitioner and the first respondent, and it formed the basis upon which they agreed to participate with each other as shareholders in the company, that the petitioner could rely on the first respondent to ensure that the company was run as a family company, the affairs of the company would be properly conducted by the first respondent and the directors of the company, and each of them, in accordance with the constitution of the company, and in accordance with the duties owed by the directors to the company; that in relation to the company, the first respondent would act in accordance with the common law and/or fiduciary duties which he owed to the company as a director, and, in particular, that he or she would act bona fide in the interests of the company, and not for any collateral purpose.”

The district judge went on to say that there was no evidence of such an agreement. She said that the petitioner dealt in his witness statement with the circumstances surrounding, and leading up to, his not becoming a member of the company until November 2011, but there was nothing within that witness statement for the period 1971 to 2002 that suggested that any understanding or agreement was reached. His case was based on the fact that he was a beneficial owner of shares prior to that date.

In the course of his submissions, Mr Groves has made it clear that he is not seeking to rely upon the second limb identified by Lord Hoffmann in the O’Neill case. Rather, he is relying upon the first limb of that case, namely a breach of the rules upon which the affairs of the company fell to be conducted and regulated. Mr Groves also made it clear that paragraph 22 was not the basis of the strikeout application, that no particulars of it had been requested by the respondent, and that it had not been addressed in Lisa Clough’s supporting witness statement. All of that is true. However, equally, it seems to me, none of that derogates from the points made by the district judge at paragraph 54 of her judgment.

At paragraph 61, the district judge said that the primary complaint which the petitioner made about the transaction in 2001 was that the company did not have authority to purchase its own shares under its articles of association. However, it was said to be clear from the documentation, and from the evidence of Miss Clough, that the transactions had been formally recorded, and carried out, with the assistance of accountants, tax advisors and solicitors; and that had culminated, on 31^st October 2001, with written resolutions that were passed unanimously by all the directors and shareholders of the company. That resolution was exhibited to Miss Clough’s witness statement and was reproduced at paragraph 61 of the judgment.

At paragraph 62, the district judge observed that the petitioner had expressed his concerns about the documentation, and the fact that the statutory books were believed to have been lost, which had resulted in the respondent solicitors having to reconstruct them. They were therefore in the position of not being able to produce originals, or copies of the originals. However, she observed that that which was lost had then been found; and, at the start of the hearing, she had been handed Miss Catherine Anne Bateson’s witness statement of 23^rd January, which was said to deal with the statutory books which she had found in her home, and she had provided an explanation as to the circumstances surrounding her finding them.

At paragraph 64, having referred to submissions from Mr Groves, the district judge observed that, although the resolution might not have been filed at Companies House at the appropriate time, that did not invalidate it. There was said to be no suggestion by the petitioner that the document was a forgery, and anything else therefore was merely speculation. When she examined the case on its particular facts, she could not see how the petitioner could, in the circumstances she there set out, complain of unfairly prejudicial conduct in relation to those transactions. It was said that the petitioner simply could not get over the hurdle of the Duomatic principle. If he had a complaint, then it was against his trustee, and not against the respondent or the company. The district judge therefore concluded that those parts of the petition that related to the 2001 transactions, and the corporate reconstruction undertaken by the company in 2001, fell to be struck out. She did not accept the submissions made by Mr Groves regarding questions to be asked in relation to those transactions, the non-acceptance of the 2001 resolution and so forth, because these were all ratified by shareholders following advice being taken from professionals.

Mr Groves criticises the reference to “advice from professionals”. In my judgment, that is not a criticism that deprives the district judge’s conclusion of its force because, whether or not following advice being taken from professionals, the fact is that on the evidence, the 2001 transactions were indeed ratified by all of the shareholders, including the trustees who were then holding the petitioner’s shares. At paragraph 65, the district judge said that there was no evidence that the transactions caused loss to the company or were prejudicial to any member; but she added that they were expressly approved by all the shareholders, and the petitioner could not, when one considered the case law, complain that those transactions were unfairly prejudicial to his interests as a member because he could not show that there had been a breach of the rules upon which he had agreed to become a member, or that the company was using the rules in a manner which was contrary to good faith.

The district judge then turned to consider the petitioner’s complaints in relation to the buyback of some of the respondent’s shares in 2008. She referred to his similar complaint that the buyback of those shares in 2008 was not authorised under the company’s articles of association. At paragraph 70, the district judge said that Mr Groves accepted that the Duomatic principle was good law; but he went on to submit that that principle could not prevent a complaint under section 994, otherwise Lloyd v Casey would be bad law. The district judge said that she agreed and that it could not.

At paragraph 71, she went on to say that one could distinguish Lloyd v Casey, and the Duomatic principle, because what the principle does in this case before the court was to prevent the petitioner from making a complaint about past conduct, which conduct all the shareholders at the material time expressly consented to, having taken legal advice from legal and other professional advisors. The last sentence of the immediately preceding paragraph, paragraph 69, made it clear that the district judge’s view was that each case turned on its own facts.

I have some slight difficulty in understanding precisely what the district judge was saying, if what she says is taken literally; but I have no doubt that what she intended to convey was this: first, each case turned on its own facts; secondly, the Duomatic principle was good law; thirdly, that principle could not necessarily prevent a complaint under section 994, but that each case must be judged on its own facts; fourthly, in the instant case, because all of the shareholders had either authorised or ratified the conduct of which complaint was made, the Duomatic principle did apply, and it prevented the petitioner from complaining about past conduct to which all of the shareholders at the material time had expressly consented, unless the petitioner could point to some special facts, as in Lloyd v Casey, which would have operated to render the unanimous consent of the shareholders ineffective. I have no doubt that that was what the district judge was seeking to convey.

At paragraph 73, the district judge said that, in the absence of any evidence of loss to the company, in a situation where the petitioner was not a shareholder in 2008, and all existing shareholders had given their informed consent, including the trustees, and where there was no evidence of any understanding or agreement reached between 2001 and 2008, those parts of the petition which related to the 2001 transactions, and which were the subject matter of the respondent’s application, must be struck out. In my judgment, precisely the same applies to the 2008 transactions. Even if there had been evidence of loss to the company, in circumstances where all the then shareholders had given their consent to both series of transactions, then the petitioner, who only became a shareholder in the company after the relevant transactions, could not properly complain of conduct as being unfairly prejudicial when all of the shareholders, including the trustees who then held the shares on trust for him, in respect of which he later became registered, had authorised or ratified the transactions in question.

At paragraph 74, the district judge referred to the fact that the petitioner said that he had only found out about the 2008 transactions – and the same applied to the 2001 transactions – at about the same time, in November 2008, as he was made aware of the extent of his beneficial shareholdings. She said that he did not consult solicitors until late 2010. That delay was explained by the petitioner; but, in my judgment, there is nothing wrong with the district judge’s following statement, that in the circumstances, and when one applies the law and the Duomatic principles to the facts of the case, the paragraphs in the petition that related to complaints about the buyback of some of the respondent’s shares in 2008 also fell in her judgment to be struck out.

At paragraph 75, she summarised the reasons for her decision as follows:

“The reason that I have reached my decision is because I do not consider that the petitioner has a real, or indeed any, prospect of establishing that: (a) the first respondent was under any equitable duties to the petitioner in 2001 or 2008 which overrode the legal relationship between the registered shareholders; or (b) there was anything in either the 2001 or 2008 transactions which was capable of being unfairly prejudicial to the interests of the petitioner as a present member of the company.”

The grounds of appeal are three in number, although they comprehend various sub-grounds. The first is that it is said that the learned district judge was wrong in law in holding, first, that, as a member of the company, the petitioner was not entitled, under section 994, to complain of unfairly prejudicial conduct unless he could prove that at the time of the conduct complained of, there was an agreement or understanding between himself and the respondent which imposed equitable duties in his favour.

Secondly, it is said she was wrong in holding that the petitioner was basing the unfairly prejudicial conduct asserted in the petition wholly on the existence or otherwise of the agreement or understanding of the petitioner stated in paragraph 22, rather than upon the specific matters stated in the relevant paragraphs of the petition, striking out of which was sought.

Thirdly, it is said that the district judge was wrong in holding that Lloyd v Casey was authority for the proposition that a registered member could only complain of unfairly prejudicial conduct that occurred before being registered as a member if that member could prove that such conduct consisted of a breach of a pre-existing agreement between the petitioner and the respondent.

Fourthly, it is said she was wrong in holding that because the unfairly prejudicial conduct asserted by the petitioner was expressly and unanimously approved by all of the members at the time, it therefore followed, in the case before the court, that there could be no complaint because of the Duomatic principle.

Fifthly, the district judge was said to be wrong in determining that there was no agreement or understanding between the petitioner and the respondent in relation to the conduct of the company’s affairs, when the same had been pleaded by the petitioner in paragraph 22, and that paragraph had not been the subject of a strikeout or summary judgment application, and nor had the evidence of the respondent addressed that paragraph at all.

Sixthly, it was said the district judge was wrong in holding that if the petitioner had any complaints in relation to any matters whilst he was a beneficiary under a trust of shares in the company, then the remedy for such a breach lay solely in an action against his trustees, and he could not petition under section 994.

Finally, and seventhly, it was said that the district judge was wrong in holding that the petitioner was basing the petition on proving that the respondent owed equitable duties to him in 2001 and/or 2008 which overrode the legal relationship between the registered members.

The second ground of appeal was that the district judge had been wrong in law in distinguishing Lloyd v Casey and the Duomatic principle on the basis that in the case before the court, the petitioner was prevented from making a complaint about past conduct because all the shareholders at the material time expressly consented, having taken advice from legal and other professional advisors.

The third ground of appeal was that the district judge was wrong in the exercise of her discretion in granting judgment to the respondent in failing to take sufficient account of seven specified matters. Those were itemised in the grounds of appeal at subparagraphs (a) through to (g), and I do not need to set them out separately.

Although he elaborates upon his grounds of appeal at much greater length at paragraphs 35 of his written skeleton argument onwards, it seems to me that the thrust of Mr Groves’s argument is to be found at paragraphs 4 through to 14 of that skeleton. Mr Groves begins by acknowledging that, in the lower court, it was accepted that a petitioner could complain under section 994 about conduct that had occurred in the past and, in particular, relying on Lloyd v Casey, conduct occurring before the petitioner had become a member.

Mr Groves acknowledged that the appellant had become registered as a member of the company on 10^th November 2011 and, prior to that date, the shares had been held on trust for him; but he said that the district judge had decided that Lloyd v Casey could be distinguished, and the appellant could therefore not complain of the unfairly prejudicial conduct because the court determined: (a) that there was no agreement between the appellant and the respondent in relation to the conduct of the company’s affairs; (b) all the members of the company at the time had expressly and formally agreed to the transactions constituting the unfairly prejudicial conduct; and (c) the appellant’s shares were not held by David Bateson, a director of the company, rather than by independent trustees.

At paragraph 6 of his written skeleton, Mr Groves said that the lower court had approached the respondent’s application on the basis that the burden was on the appellant to prove the existence of an agreement with the respondent, which would impose an equitable duty on the respondent in favour of the appellant, and the breach of that agreement. Mr Groves submits that this was a fundamentally wrong approach to the consideration of the petition and the respondent’s application.

In my judgment, there is nothing in that submission. In view of the unanimous consent of all of the members of the company at the time of the relevant conduct, it seems to me that the only basis upon which the petitioner could properly assert that that conduct had been unfairly prejudicial to him would have been if he could have pointed to some agreement which would have imposed an equitable duty on either the respondent, or other shareholders, in favour of the appellant, and some breach of that agreement.

In my judgment, the matter is put correctly at paragraph 24 of Mr Berragan’s skeleton argument. There he says that the petitioner’s case in relation to each of the 2001 and 2008 transactions is based squarely and solely upon the petitioner’s position as the beneficial owner of the trust shares at the relevant time. The petitioner does not allege that there was any agreement or understanding to the effect that the respondent should not rely upon the votes of the trustees who were registered as members of the trust shares, but should instead consider separately the petitioner’s wishes, and/or obtain the petitioner’s direct consent in relation to the conduct of the company’s affairs.

At paragraph 25, Mr Berragan goes on to submit that the petitioner’s case amounts to this: although the company was entitled, as a matter of law, to rely upon the consent given by its members to the transactions in 2001 and 2008, the respondent, or the company’s directors and shareholders at the time, should have had regard separately to the petitioner’s own interests and, presumably, sought his consent. That is said to fly in the face of the principle that the company cannot look behind the register of its own members. Reference in that regard is made to the case cited by the district judge at paragraph 46 of her judgment – the case of Inland Revenue Commissioners v J Bibby & Sons Ltd [1945] 1 All ER 667. Mr Berragan submits that absent (1) a rule or term in the constitution of the company requiring the interests of beneficiaries to be taken into account separately, or (2) a special agreement or understanding which is binding on the company or directors or other shareholders in equity, there can be no unfairness in the company acting on the basis of the unanimous consent of its members. I accept that submission.

At paragraph 7 of Mr Groves’s skeleton, he submits that the lower court was wrong to distinguish Lloyd v Casey on any or all of the grounds outlined in paragraph 5 of his skeleton, which I have already related. He also submits that the lower court was wrong to determine that there was no agreement between the appellant and the respondent in relation to the conduct of the company’s affairs. He says that because: (a) the petition did contain an express assertion of a fundamental understanding or agreement between the appellant and the respondent at paragraph 22; (b) the issue of whether or not there was such an agreement was not part of the respondent’s application and/or a matter that was addressed in evidence at all by either the appellant or the respondent; and (c) the appellant’s case was based on the unfairly prejudicial conduct having occurred whether or not there was such an agreement in existence.

In my judgment, there was no sufficient plea, nor was there any evidential basis, of or for any agreement predating the entry of the petitioner on the register of members. The unparticularised agreement in paragraph 22 of the petition is said to be a fundamental understanding between the petitioner and the respondent as to the basis upon which they agree to participate with each other as shareholders in the company. The petitioner only became a shareholder in the company when his name was entered on the register of members on 10^th November 2011, and not before. But even if that is an unduly literalistic approach to paragraph 22, one needs to look to the content of the agreement or understanding alleged. It is simply that the company would be run as a family company, that its affairs would be properly conducted in accordance with the company’s constitution and the duties owed by the company’s directors, and that the respondent would act in accordance with the common law and/or fiduciary duties which he owed to the company as a director, and, in particular, that he or she would act bona fide in the company’s interests, and not for any collateral purpose. There is no allegation of any agreement along the lines postulated by Mr Berragan, and to which I have already referred, which, in my judgment, would be required in order to counteract the unanimous consent of the company’s members, including the trustees holding the petitioner’s shares at the time, to the acts of which complaint was made.

Mr Berragan, in his oral submissions, suggested two alternative analyses in support of his submission. First, he took me to what was said by Lord Hoffmann in the O’Neil v Phillips case at page 1098G. There Lord Hoffmann identified the first of the two features which he had previously identified as leading to the conclusion that a member of a company will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted. Mr Berragan submitted that the terms on which a member agrees that the affairs of the company should be conducted include, and extend, to the unanimous consent by the shareholders to a course of action, so long as it does not fall outwith the Duomatic principle in the sense in which that was described by District Judge Obodai at paragraph 49 of her judgment; in other words, unless there is a fraud on the company’s creditors, or an ultra vires transaction, or, I would add, a transaction contrary to the criminal law of the relevant land.

Mr Berragan submitted that someone who later becomes a member of a company is bound by shareholder resolutions which have unanimously been passed by all of the shareholders in the company, including those from whom he derives title. Mr Berragan submits that a member of a company who approves a course of action cannot then complain about it because he expressly agreed to it. Similarly, a successor in title to such a member cannot complain because at the time of the relevant transaction there was no breach of the rules upon which the members had agreed to conduct the company’s affairs.

The second route to the same conclusion was that even if a transaction can be said to have prejudiced the interests of a member, it cannot be treated as unfairly prejudicial to that member’s interests if that member expressly consented to the conduct in question. A successor in title to that member cannot be in any better position. Mr Berragan submitted that it can make no difference if the consenting member holds his shares on trust for a beneficiary, such as the petitioner; since the interests of the beneficiary and the trustee are co-extensive, the trustee/member’s conduct will bind the beneficiary even if the beneficiary himself is later registered as a member. He can then no longer complain of that conduct as conduct unfairly prejudicial to himself. I accept that submission.

At paragraph 8 of his written skeleton, Mr Groves submitted that the court below appeared to view the appellant’s argument as being founded upon an assertion that the court should subject the appellant’s strict legal rights to equitable considerations because the appellant had alleged the existence of an express understanding or agreement between the appellant and the respondent. Reference is made to paragraphs 53 and 54 of the judgment. That is said to have been a wrong analysis, both of the petition and of the appellant’s case. In my judgment, there was no error on the part of the lower court in this regard. In the face of the unanimous shareholder approval for the acts of which complaint is now made by the petitioner, in my judgment, and absent any express agreement or understanding giving rise to some equitable consideration preventing reliance being placed upon such shareholder consent, there can be no valid complaint of unfairly prejudicial conduct. Indeed, the conduct itself cannot be said to be unfairly prejudicial to the interests of the petitioner as the beneficiary of the shares whose registered member had consented to the conduct.

At paragraph 9 of Mr Groves’s skeleton, he says that the unfairly prejudicial conduct stated in the petition was based on a failure by the respondent to follow rules and company law and director’s duties, resulting in serious mismanagement, and adversely affecting the value of the appellant’s shares. It is said that the unfairly prejudicial conduct was not based on the appellant proving the existence of an express agreement that such conduct would not take place, and/or the existence of a quasi-partnership, albeit that the petition did in fact contain an assertion by the appellant of a fundamental understanding with the respondent. In my judgment, there is nothing in this point because the unanimous shareholder approval is a complete answer to the assertion of unfairly prejudicial conduct.

In my judgment, that also supplies the answer to paragraph 10 of Mr Groves’s skeleton. He says that every member of a company is, in any event, entitled to expect that the company’s articles are duly complied with by the company and its directors as it is part of the statutory contract involving the company’s members under section 33 of the 2006 Act. It is said to go without saying that a director must comply with his director’s duties. It is said that those are not matters that require the proof of an additional or express agreement to that effect before a petitioner can complain of breaches of a company’s constitution, or breaches of director’s duties, as unfair prejudice. Again, in my judgment, the answer to that is that here there was the unanimous consent of all of the shareholders, and persons deriving title through them cannot complain that the relevant conduct which they have approved is unduly prejudicial within the meaning of section 994 of the 2006 Act.

It is unnecessary for me to deal with the other arguments set out by Mr Groves in his skeleton. I do not accept that District Judge Obodai was wrong in her conclusions. I acknowledge that the unfairly prejudicial conduct complained of is not directly linked to proving the existence of any quasi-partnership, or any particular agreement or understanding underpinning such a quasi-partnership. I acknowledge that the unfairly prejudicial conduct asserted is based on what is said to have been a serious mismanagement of the company affairs, breaches of company law rules, and breaches of director’s duties; but irrespective of the facts, it is a complete answer to the complaint of unfairly prejudicial conduct that that conduct was authorised, or ratified, by the unanimous agreement of all of the company’s shareholders, including the trustees, who held the shares of the petitioner on trust for him. In my judgment, unless the petitioner had pleaded, and at trial were to prove, the existence of some legitimate expectation that the members would not consent to such conduct, then there is no basis for any assertion that the matters complained of in the relevant paragraphs of the petition were unfairly prejudicial to the petitioner. There is no such plea, and nor is there any evidence from the petitioner to support it.

Mr Groves, in oral submissions, placed particular reliance upon the decision of the Privy Council in the case of Bermuda Cablevision Ltd v Colica Trust Co Ltd [1997] BCC 982. Mr Groves relied upon that authority for the proposition that the fact that the trustees of the shares had approved the relevant conduct could not be a complete answer. Mr Groves relied in particular on passages at page 990F through to 991H. In my judgment, the complete answer to that submission, and Mr Groves’s reliance upon the Bermuda Cablevision case, is that there the unlawful conduct constituted a criminal offence, and was not capable of being validated, even by the unanimous consent of all of the company’s shareholders, otherwise the relevant section would have been something of a dead letter and would not have achieved the statutory objective which the provision was enacted to achieve.

Mr Groves submitted that it cannot be the law that anything that is ratifiable by the members is incapable of constituting unfair prejudice. In my judgment, as Mr Berragan submitted, a petitioner cannot complain about matters to which he, or those from whom he derives title to his shares, have expressly consented. Mr Groves emphasised that the passage from Hollington on Shareholders’ Rights, which was cited by the district judge at paragraph 49, refers in terms to the fact that an aggrieved minority shareholder who has acquiesced in the wrongdoing in question will, under general equitable principles, be debarred from bringing a derivative claim in respect of that wrongdoing. Mr Groves emphasised that the passage was directed to the bringing of a derivative claim, and not the presentation of an unfair prejudice petition under section 994 of the Companies Act. In my judgment, that is an irrelevant distinction. If one cannot complain about conduct to which all of the shareholders have acquiesced by way of derivative claim, I simply cannot see how it can be said that that conduct can be said to have been unfairly prejudicial to any part of the company’s members. All have consented to it. A shareholder who comes to the company later, and after the conduct to which consent has been given, cannot say that that conduct has been unfairly prejudicial to him.

For those reasons, I am satisfied that the district judge’s decision was neither wrong nor unjust because of any form of error. I have heard full argument in this matter. In those circumstances, it seems to me that I should give permission to appeal; but I dismiss the appeal.